A company was used as a third party to pay former central bank governor Christodoulos Christodoulou €1m on behalf of a bank in Greece that was in the process of merging with Cypriot lender Laiki, an expert witness told the Nicosia criminal court on Wednesday.
Demetris Loucaides was testifying in the corruption trial involving Christodoulou who is accused of accepting a €1m payment to turn a blind eye to the takeover of former Laiki Bank in 2006 by late financier Andreas Vgenopoulos.
Earlier, the court rejected a defence objection regarding Loucaides’ testimony.
Tracing the source of the money, Loucaides told the court that Focus Maritime Corp., a company ostensibly belonging to shipowner Michalis Zolotas, had been granted credit worth €80m by Egnatia Bank in February 2007.
The agreement provided that the cash would be wholly used as investment capital and after the transaction, Focus would pay Marfin Egnatia 30 per cent of the profit.
On February 16, 2007, the Investment Bank of Greece (IBG) bought on credit 9 million Laiki shares on behalf of Focus worth €75,518,388.
On July 5, 2007, 7.3 million Laiki shares were sold for €68,249,797 and change, and on the next day the remaining 1.7 million shares were sold for €16,466,037 and change.
Total revenue from the sale was €84,721,635, which was transferred to Focus’ account from IBG.
The profit for the company was €10,617,924 of which 30 per cent, or €3,185,377, should have been paid to Egnatia, in line with the agreement.
Loucaides said the documents and emails in the hands of the authorities showed that the deal was being overseen by banker Michalis Fole, under the guidance of former Marfin Egnatia executive and Vgenopoulos associate, Kyriacos Mayiras.
It is also obvious, he added, that the transactions were executed on Mayiras’ instructions and Zolotas simply signed off their execution.
The transactions concerning the particular deal was marked ‘XXXXXX’ on documents and emails, the court heard.
On July 27, 2007, Mayiras instructed Zolotas to transfer €1m to an account belonging to AC Christodoulou Consultants Ltd in Marfin Egnatia. The company was in the name of Christodoulou’s daughter Athina. The Christodoulous said the money was payment for consultancy services.
Zolotas responded in an email the same day: “done, reverting to tell you when exact transfer done.”
The fact that the transaction concerned Mayiras and Marfin and not Zolotas and Focus was confirmed by another email sent by Fole, which discusses the profit made from the sale of the 9 million shares and the bank’s share of the profit.
The money paid into Christodoulou’s account came from Marfin’s share of the profit, Loucaides told the court.
“Considering that the agreement was between Focus and AC Christodoulou Consultants, why is Mr Mayiras giving instructions and the details of the account … for the payment of the money to Mr Zolotas and not vice versa as it should have been?” Loucaides said.
He testified further that numerous withdrawals of cash had been made from accounts belonging to Focus without any explanation as to the reasons.
In some cases, the names of Fole and Mayiras or both, appeared on the withdrawals.
Cash withdrawals are considered high risk in relation to money laundering because neither the source nor the destination are recorded, Loucaides said.
“Looking at the evidence, the various documents and transactions, I am of the opinion that the 30 per cent profit that represented Egnatia’s, later Marfin Egnatia, share, was not paid to the banks but remained in the accounts of Focus Maritime and used for other payments, not to the bank’s benefit.”
The payments “were done on Mr Mayiras instructions, in consultation with Mr Zolotas who was the signee, and the involvement of Mr Fole, who was Focus’ banker,” Loucaides said.
He added that the facts “show that the €1m payment made by Focus to AC Christodoulou Consultants Ltd was on behalf of Marfin on the instruction of Mr Mayiras and it was done in the particular way to hide the real payer and reason for the transaction.”
The witness said using a third party to carry out transactions was one of the most widespread and known methods in money laundering.
“In the particular case, the third party was Focus.”
Christodoulou, daughter Athina, Zolotas, former Laiki official Michalis Fole, and companies AC Christodoulou Consultants Ltd, Marfin Investment Group (MIG), and Focus Maritime Corp. face a total of 24 charges including corruption, bribery, abuse of authority, abuse of trust, and money laundering.
Zolotas faces a single count relating to money laundering.
Cyprus had sought Mayiras extradition from Greece but the country’s supreme court rejected the request. The court argued that some of the alleged offences he was sought over had been stricken off under the statute of limitations while others were committed in Greece.